A Coalition plan to extend unfair contract provisions to small businesses could blow up in the party’s face, if in government it tried to implement the changes without keeping a tight handle on the issues, a key lawyer says.

The plan outlined last month under the opposition’s 18-page small business policy seeks to extend to small businesses similar protection that consumers have enjoyed since 2010 under the new Australian Consumer Law. Small businesses have little negotiating contract terms with larger businesses and often have to suck up terms dictated by the larger party.

The policy is one of a handful laid out by Tony Abbott’s party along with a planned root-and-branch review of the competition and trade-practices framework.

The scope of this reform could explode in their face unless they are really disciplined

The risks are plenty, however. Just defining which businesses will benefit from the regime and which will fall outside its scope poses enough of a risk to the whole policy, says Murray Deakin, antitrust, competition and trade regulation partner with law firm K&L Gates.

“The scope of this reform could explode in their face unless they are really disciplined about the mechanism as to who is a small business that should be protected and who is not,” Deakin says. “It will potentially unravel in their hands if they’re not very disciplined in which small businesses are to be favoured by the regime.”

Pages and pages of contracts

The scope for disruption to Australia’s business-contract framework from a mishandled initiative is huge. Even if managed smoothly, any change along these lines would mean major changes for all businesses, as many contracts are consciously drawn up to favour one particular side of the transaction. A botched job would make it worse.

“You could be talking about a very substantial population of commercial contracts out there in the economy being executed and applied every day of the week,” Deakin said.

The Coalition would seek to make the changes – for which it has said it will allocate $1 million to implement – with minimal disruption, said a spokesman for shadow minister for small business, competition policy and consumer affairs Bruce Billson.

“We have made it clear to all concerned and interested stakeholders that we will consult widely in regard to the legislation and implementation if we are able to form Government,” the spokesman said.

It doesn’t have to be hard

The question of definition could simply be solved – and limited to truly small businesses – by setting the same $40,000 threshold for transactions by small businesses as that which currently applies to consumer transactions, Deakin said.

Still, the issue will increase the compliance burden on companies by requiring all businesses – including the small businesses this policy aims to help – to rewrite contracts they have with other businesses.

“It’s a two-edged sword,” Deakin said. “I’m not convinced the small business community quite appreciate that. They might find themselves opening up a Pandora’s box. It might create more litigation than it seeks to resolve.”

This would not necessarily be the case, the spokesman said.

“It’s not our belief this will create an extra layer of red tape for small business, given the experience of unfair contracts in the consumer space, the current role and engagement of the ACCC and the insights gained by all parties as a result of this practical experience.”